Zachary v. Cobalt Mortgage, Inc.
MEMORANDUM OPINION AND ORDER re 18 MOTION to Certify Class Conditionally Pursuant to the FLSA filed by Elizabeth Zachary. Plaintiffs counsel shall file the signed consent forms with the Court. All consent forms postmarked or fax-stamped on or before the end of the Opt-In Period will be considered timely. Signed by Judge Amos L. Mazzant, III on 3/22/17. (cm, )
United States District Court
EASTERN DISTRICT OF TEXAS
ELIZABETH ZACHARY, ON BEHALF OF
HERSELF AND ALL OTHERS
COBALT MORTGAGE, INC.
Civil Action No. 4:16-CV-00754
MEMORANDUM OPINION AND ORDER
Pending before the Court is Plaintiff’s Motion for Notice and FLSA Conditional
Certification (Dkt. #18). Having considered the pleadings, the Court finds that the motion should
Plaintiff is a former employee of Defendant Cobalt Mortgage, Inc. Defendant was a
nationwide mortgage lender that ceased operations in November 2014. Defendant employed
Plaintiff as a Senior Processor in its Plano, Texas office from September 2012 through February
2013 and from August 2013 through July 2014.
Processors, Senior Processors, and other
employees with similar titles (collectively, “Processors”) assisted Defendant’s mortgage loan
officers in processing and closing mortgage products.
Plaintiff alleges that Defendant did not pay Processors overtime compensation for hours
worked over forty per week in violation of the Fair Labor Standards Act (“FLSA”),
29 U.S.C. § 201, et seq. Plaintiff moves for conditional certification as a collective action under
the FLSA. Defendant opposes conditional certification on the ground that Plaintiff has not
provided evidence of a common policy or plan affecting Processors.
Plaintiff and nine opt-in Plaintiffs from seven offices state that they “usually worked in
excess of forty (40) hours per workweek” and that Defendant did not pay them overtime for these
excess hours. Plaintiff and opt-in Plaintiffs further allege that their managers discouraged them
from reporting overtime hours and told them not to report overtime hours. Plaintiff and opt-in
Plaintiffs state that their managers knew they were not fully reporting all of their hours.
Defendant classified Processors as non-exempt, hourly employees under the FLSA.
Defendant concedes that Processors had the same job descriptions and generally shared common
job duties. Defendant argues that it did not have a company-wide policy or practice of requiring
Processors to work overtime off the clock and did not permit non-exempt employees to work off
the clock. Defendant states it required non-exempt employees to report all time worked in its
timekeeping software. According to Defendant, it paid non-exempt employees overtime when
required by law, regardless of whether it had authorized employees to work overtime. Defendant’s
timekeeping records indicate that it paid Plaintiff and five opt-in Plaintiffs overtime from
September 2013 to November 2014.
Plaintiff further alleges that Defendant failed to include non-discretionary bonuses in
Processors’ regular rate of pay for overtime calculations. Defendant concedes that it did not
include non-discretionary bonuses in Processors’ regular rates of pay and does not oppose
conditional certification of the bonus collective groups.
On December 8, 2016, Plaintiff filed the pending Motion for Notice and FLSA Conditional
Certification (Dkt. #18). On January 17, 2017, Defendant filed a response (Dkt. #20). On January
31, 2017, Plaintiff filed a reply (Dkt. #21). Defendant filed a sur-reply on February 3, 2017
The FLSA requires covered employers to compensate nonexempt employees at overtime
rates for time worked in excess of statutorily defined maximum hours. 29 U.S.C. § 207(a). Section
216(b) of the FLSA gives employees the right to bring an action on behalf of themselves, as well
as “other employees similarly situated” for violations of the FLSA. 29 U.S.C. § 216(b). “Under
§ 216(b), district courts have the discretionary power to conditionally certify collective actions and
authorize notice to potential class members.” Tice v. AOC Senior Home Health Corp.,
826 F. Supp. 2d 990, 994 (E.D. Tex. 2011).
While the Fifth Circuit has not specifically addressed the meaning of “similarly situated”
in this context, “[t]wo approaches are used by courts to determine whether collective treatment
under § 216(b) is appropriate: (1) the two-stage class certification set forth in Lusardi v. Xerox,
Corp., 118 F.R.D. 351 (D. N.J. 1987); and (2) the ‘Spurious Class Action’ method outlined in
Shushan v. Univ. of Colorado, 132 F.R.D. 263 (D. Colo. 1990).” Cripe v. Denison Glass Mirror,
Inc., No. 4:11-CV-224, 2012 WL 947455, at *3 (E.D. Tex. Jan 27, 2012) report and
recommendation adopted, 2012 WL 947362 (E.D. Tex. Mar. 20, 2012); Villatoro v. Kim Son Rest,
L.P., 286 F. Supp. 2d 807, 809 (S.D. Tex. 2003). “The Lusardi two-stage approach is the
prevailing standard among federal courts.” Tice, 826 F. Supp. 2d at 994 (citations omitted). This
Court has applied the Lusardi approach in a number of other cases. See Halleen v. Belk, Inc., No.
4:16-CV-00055, 2016 WL 5118646, at *2 (E.D. Tex. Sept. 21, 2016); Miranda v. Mahard Egg
Farm, Inc., No. 4:15-CV-406, 2016 WL 1704861, at *1 (E.D. Tex. Apr. 28, 2016); Stier v. Great
Plains Nat'l Bank, No. 4:15-CV-519, 2016 WL 1572194, at *1 (E.D. Tex. Apr. 19, 2016). As
such, the Court will apply the Lusardi approach in this case.
Under Lusardi, “certification for a collective action under § 216(b) is divided into two
stages: (1) the notice stage; and (2) the merits stage.” Id. “At the notice stage, the district court
makes a decision—usually based only on the pleadings and any affidavits which have been
submitted—whether notice of the action should be given to potential class members.” Mooney v.
Aramco Servs. Co., 54 F.3d 1207, 1213-14 (5th Cir. 1995), overruled on other grounds by Desert
Palace, Inc. v. Costa, 539 U.S. 90 (2003). Because the Court has minimal evidence before it at
this stage, “the determination is made using a fairly lenient standard requiring nothing more than
substantial allegations that the putative class members were victims of a single decision, policy or
plan.” Tice, 826 F. Supp. 2d at 995. “Notice is appropriate if the court concludes that there is
‘some factual nexus which binds the named plaintiffs and potential class members together as
victims of a particular alleged [policy or practice].’” Allen v. McWane, Inc., No. 2:06-CV-158
(TJW), 2006 WL 3246531, at *2 (E.D. Tex. Nov. 7, 2006). “If the first step [of the Lusardi
approach] is satisfied, the court conditionally certifies a class; and the action proceeds as a
collective action during discovery.” Sedtal v. Genuine Parts Co., No. 1:08-CV-413-TH, 2009 WL
2216593, at *3 (E.D. Tex. July 23, 2009).
Statute of Limitations
The statute of limitations for an FLSA claim is two years, unless the violation was willful,
in which case the limitations period is three years. 29 U.S.C. § 255(a). Under the FLSA, a
violation is “willful” if the employer either “knew or showed reckless disregard for ... whether its
conduct was prohibited by the statute.” Singer v. City of Waco, Tex., 324 F.3d 813, 821
(5th Cir. 2003). If a Plaintiff alleges a willful violation of the FLSA, courts routinely grant
conditional certification and “send notice to the putative class using a three-year statute of
Page v. Crescent Directional Drilling, L.P., No. 5:15-CV-193-RP, 2015 WL
12660425, at *3 (W.D. Tex. Dec. 10, 2015) (citing McPherson v. LEAM Drilling Sys., LLC, 4:14CV-02361, 2015 WL 1470554, at *15 (S.D. Tex. Mar. 30, 2015); Rousseau v. Frederick's Bistro,
LTD, 5: 09-CV-651-XR, 2010 WL 1425599, at *3 (W.D. Tex. Apr. 7, 2010)). “Whether
Defendant acted willfully is a question of fact, and the Court will not make a determination on that
question before discovery has been completed.” Id.
The Court finds that notice should be provided within the longer three-year statute of
limitations. Plaintiff alleged that Defendant willfully violated the FLSA. See Dkt. #1 at ¶ 38.
Defendant argues that a two-year statute of limitation applies because Plaintiff has not shown that
Defendant’s alleged FLSA violation was willful. The cases Defendant cites finding no willful
violations of the FLSA were decided through summary judgment or post-trial motions. See OjedaSanchez v. Bland Farms, LLC, 499 F. App'x 897, 903 (11th Cir. 2012); Switzer v. Wachovia Corp.,
No. CIV.A. H-11-1604, 2012 WL 3685978, at *5 (S.D. Tex. Aug. 24, 2012); Saxton v. Young, 479
F. Supp. 2d 1243, 1254 (N.D. Ala. 2007). Discovery has not occurred in this case. The Court will
not determine the factual question of whether Defendant acted willfully before discovery is
completed. “The consequences of sending notice to too few potential plaintiffs are high, as the
FLSA’s statute of limitations continues to run on each individual’s claim until they file their
written consent to join the collective action with the court . . . By contrast, the consequences of
sending notice to too many potential plaintiffs can be remedied – a class may be decertified.”
Page, 2015 WL 12660425, at *3.
Policy Requiring Off-the-Clock Overtime
Plaintiff argues Defendant had a policy of requiring Processors to work in excess of 40
hours per week and did not pay Processors for all hours worked. Plaintiff and nine opt-in Plaintiffs
state that their managers told them not to report overtime hours.
Plaintiff has satisfied the lenient Lusardi standard requiring nothing more than substantial
allegations that the putative class members were victims of a single decision, policy, or plan.
Plaintiff and opt-in Plaintiffs here sufficiently alleged that they were victims of a similar plan under
which they did not receive overtime compensation because managers told them not to report
overtime hours. See Tice, 826 F. Supp. 2d at 996 (granting conditional certification where all
Plaintiffs claimed that they were required to work overtime without appropriate compensation);
Foraker v. Highpoint Sw., Servs., L.P., No. CIV.A. H-06-1856, 2006 WL 2585047, at *4 (S.D.
Tex. Sept. 7, 2006) (granting conditional certification because “Plaintiffs’ claim [was]
fundamentally that they routinely worked in excess of forty hours per week, that they did not
receive any overtime pay, and that [Defendant’s] practice or policy of failing to pay overtime
affected the proposed class members in exactly the same way.”).
Defendant argues that its policies did not permit non-exempt employees to work overtime
off the clock and that it paid non-exempt employees for any overtime worked, even if
unauthorized. Defendant cites a number of cases to support its argument that “where, as here, the
Plaintiff’s alleged company-wide policy is merely evidence of one or more malfeasant managers,
Courts routinely deny conditional certification.” However, these cases are distinguishable. In
Hickson v. U.S. Postal Serv., No. 5:09CV83, 2010 WL 3835887, at *13 (E.D. Tex. July 22, 2010),
(E.D. Tex. Sept. 28, 2010), the court held that conditional certification was not appropriate
because Plaintiffs had alleged at least four different practices that violated the FLSA, “making the
individual circumstance of each worker too particularized to warrant collective certification.”
Here, all ten declarations Plaintiff submitted from Processors in Texas, Washington, and Colorado
state that Processors’ managers told them not to report all overtime hours worked during a week.
Similarly, in Richardson v. Wells Fargo Bank, N.A., No. 4:11-CV-00738, 2012 WL
334038, at *4 (S.D. Tex. Feb. 2, 2012), the court found two allegations of managers explicitly
telling employees to work off the clock were “insufficient to warrant the complex, enormous,
nationwide class that Plaintiffs request.” In that case, the proposed class consisted of bankers from
thousands of banking locations nationwide. Id. Here, at least ten individuals who worked in seven
of Defendant’s offices have alleged that their managers explicitly told them not to record overtime
hours. Unlike in Richardson where the proposed class consisted of thousands of banks nationwide,
here, Defendant had seventy-six offices nationwide. In the remaining cases Defendant cites,
Plaintiffs produced no evidence that other individuals had demonstrated interest in joining the
lawsuits. See Coca v. Big Bang Enters., Inc., No. CV 4:14-2122, 2015 WL 12532479, at *3
(S.D. Tex. Apr. 14, 2015); Carey v. 24 Hour Fitness USA, Inc., No. CIV.A. H-10-3009, 2012 WL
4857562, at *3 (S.D. Tex. Oct. 11, 2012).
Defendant further objects to the declarations Plaintiff submitted as conclusory allegations
that are inadmissible because they lack foundation. In their declarations, opt-in Plaintiffs state that
based upon their experience and observations working for Defendant, they understand other
Processors were subject to the same pay policies and practices of not receiving overtime. At this
stage, it is reasonable to infer that opt-in Plaintiffs had personal knowledge of the employment
conditions of other Processors based on their own observations and experiences during their
employment. See Lee v. Metrocare Servs., 980 F. Supp. 2d 754, 764 (N.D. Tex. 2013).
There is thus sufficient evidence of a common policy to satisfy the lenient first stage of
Defendant does not oppose conditional certification for Processors who received loan file
bonuses that were not included in their regular rate of pay for overtime calculation purposes.
Plaintiff’s proposed notice to Processors includes notice to these individuals.
The Court finds that Plaintiff has come forward with sufficient evidence to warrant
conditional certification of a collective action and notice to potential class members. It is therefore
ORDERED that Plaintiff’s Motion for Notice and FLSA Conditional Certification (Dkt. #18) is
It is further ORDERED, ADJUDGED AND DECREED that the Court conditionally
certifies a class of Defendant’s current and former employees that is described as follows and
referred to herein as the “Workers”:
All persons who were employed by Cobalt Mortgage, Inc., as “Processors,” “Senior
Processors,” or other like mortgage processing employee within the United States at any
time during the three-year period preceding the date of this Order.
It is further ORDERED, ADJUDGED AND DECREED that the Notice and Consent to
Join Form presented to the Court as Exhibit M to Docket #18 is conditionally approved, subject to
Plaintiff’s insertion of the appropriate dates.
Defendant is ordered to produce the names, last known addresses, and email addresses
(“Worker Information”) of current and former Workers. Defendant shall provide the Worker
Information in an electronic format within seven (7) days of the entry of this Order. Plaintiff’s
Counsel shall send the Notice and Consent Form to the Workers within seven (7) days after
Defendant provides the Worker Information to Plaintiff’s counsel. The Court authorizes Plaintiff
to immediately issue the Notice and Consent Form to those individuals whose names are being
provided as required by this Order. Plaintiff shall issue the Notice and Consent forms by U.S. mail
and email. Plaintiff may provide a self-addressed, postage paid return envelope. Plaintiff shall bear
the cost of issuing the Notice and Consent forms and any reminder notice.
The Workers shall be provided sixty (60) days after the date the Notice and Consent forms
are mailed (the “Opt-In Period”) to file a Consent to Join form opting-in to this litigation, unless
the Parties agree to permit late filings. Any re-mailing of the original notice and any reminder
notices shall not extend this deadline. Plaintiff shall inform opposing counsel as to the date on
which the Notice forms were sent to the Workers. Plaintiff’s counsel may send a reminder notice
thirty (30) days before the expiration of the Opt-In Period, provided the parties agree upon the text
of the reminder.
Plaintiff’s counsel shall file the signed consent forms with the Court. All consent forms
postmarked or fax-stamped on or before the end of the Opt-In Period will be considered timely.
Within thirty (30) days after the close of the Opt-In period, the Parties are directed to confer
pursuant to Rule 16(b) to present the Court with a proposed Joint Scheduling Order setting forth
proposed dates and covering the items set forth in the Court’s previous Order Governing
Proceedings. The proposed Joint Scheduling Order should set forth the Parties’ agreements
concerning how discovery will proceed and how the case will proceed at trial. If the Parties cannot
agree on elements of the Proposed Scheduling Order, they may present their views in the
submission for Court determination. The Parties must file the Joint Scheduling Report and Case
Management Plan within fourteen (14) days of the deadline for the Parties to confer.
SIGNED this 22nd day of March, 2017.
AMOS L. MAZZANT
UNITED STATES DISTRICT JUDGE
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